Posted
by
samzenpus
on Monday December 26, 2011 @11:01AM
from the spinning-your-wheels dept.

N!NJA writes "One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then you’re not going to find them in manufacturing. They’re where the money is, in the design, the software and the retailing of the products, not the physical making of them. Manufacturing is just so, you know, 20th century.'"

As you can see the two largest inputs are materials and Apple’s own profit margin. Despite the machine being assembled in China it’s still true that the value of that labour is trivial: 2% or so of the cost of the machine.

So what? It's not like iPads and iPhones are the only devices they're making. In fact, China, Taiwan, Japan, Thailand and other Asian countries are making almost all of electronics in the whole world. They might only profit 2% of every device, but the sheer scale of the whole manufacturing industry more than makes up for that.

Besides, Apple's devices are notoriously known for having huge profit margin going to Apple, without actual technical or manufacturing reasons for that. It is, however, only true for Apple as every other manufacturer is actually also working on really thin profit margins. When taking into account every electronics company and not just Apple, this makes the Chinese manufacturers share comparatively much larger. Comparing it to Apple tells absolutely nothing.

One of my favorite facts of this past year was the proof that China makes almost nothing out of assembling Apple's iPads and iPhones. From the article: 'If you want lots of jobs and lots of high paying jobs then youâ(TM)re not going to find them in manufacturing. Theyâ(TM)re where the money is, in the design, the software and the retailing of the products, not the physical making of them.

Sounds like someone that justifies few jobs versus the large amount of jobless.

The things that person fails to account for would be currency manipulation, government ownership of business, lack of freedom for those who do that manufacturing work, and less-than-honest accounting that is prevalent in China. Correct for those, then one can cut through the author's

If you want lots of high-paying jobs in the US and EU, kill every single guest worker program (fraud-ridden at any level), get rid of the ability to use length of unemployment (or employment) as a direct or indirect means of discriminating against the unemployed, and get rid of the tax and benefit dodges with second-class forms of labor (e.g. contractors, consultants). Finally, make it harder to not hire US citizens, within the US by making any tax cut follow the worker and is dependent on the length of time.

No, the study explains that they studied Apple devices because 1: they're "iconic" and 2: they do offer strong data that argues against what the authors say are commonly believed myths of benefits from manufacturing jobs lost by the US to China.

There's a good argument against this study, in that Apple's electronics are "iconic" but not the majority of sales even in their own markets, precisely because of the lower margins and more commodified products in the Android share of the market that better fits the Chinese manufacturing model.

But to argue that you'd have to read the study. Instead you'd rather whine about nerd rage, Apple envy, and some made-up conspiracy to get page views. Congratulations! You're a self parody.

The carriers make more. The study showed that the #1 profit share goes to iPhone telcom carriers (AT&T) over a 2 year contract. Which is why the carrier subsidizes the phone, paying Apple directly.

My main takeaway from the article was that carriers must be forced to unbundle phones from network access, to stop oppressing the consumer. Carriers should continue to subsidize upfront HW costs under a longterm payoff contract, but it must not be mandatory (or prohibitively expensive to avoid) for anyone who wants their own phone to buy access to any mobile network, at the same cost rate as a bundled phone does. Just like desktop Internet and voice service. Forcing the unbundling would do for competition, pricing and innovation what the forced unbundling of AT&T (still the one!) did starting in the 1980s, and what the inhibitions of bundling PCs with an ISP did for the Internet.

Yet another geek, who has little to no understanding about consumer demand. If the tablet trend was purely due to 'Apple Fanatics', then those fanatics would have bought their tablets and that would have been the end of it, yet almost every PC manufacturer on the planet is struggling to produce their own tablet. There is obviously a huge market and demand for devices like these. Simply claiming there is no logical reason for demand for these tablets because YOU don't see a need doesn't mean these don't meet a need in those consumers that buy them. Even sadder that you trolled out the treasured 'Apple Fanatics' and 'status symbol' buzzwords and of course were rewarded with an Insightful for it.

PC's have been trending towards simple email/web/media devices for years. The 'need' consumers see in a simple device that meets all of those wants, and is portable, has a small footprint, and easy to use, and you seriously don't see why people want tablets? I have to assume the disconnect between geeks and the regular 'joe user' is the fact that geeks are typically always power users and tablets simply don't fit the bill for that type of user, but for the vast majority of today's computing users, a tablet fits their needs perfectly for casual browsing, email, listening to music, and playing the occasional game.

Claiming the only reason for Apple's success is due to it's 'gullible' users may also get you an insightful mod, but it falls far from the truth. Apple and Linux users are shown to be far less gullible than Windows users, better educated, and tech savvy. There's a reason Apple has been number one in consumer satisfaction for something like the last decade. Their shit works, it's good quality, and people don't have to fuck with it all the time. Those are powerful draws to a casual user who browses the web, checks email, listens to music, and plays the occasional time-waster game while waiting for a doctors appointment or whatnot.

Every industrialized country has gone through this phase where subsistence farmers abandon their farms for difficult factory jobs. They don't like the factory jobs, but they like it better than subsistence farming.

They save a little bit of money, and produce children who wind up becoming educated and form the middle class.

To say that China's not profiting from these assembly plants is taking a very short-term view.

Jobs.
China still has on the order of 600 million subsistence-level peasants.
Leaving those people in that state while a smaller number get
comparatively richer working in the cities at manufacturing, construction, and related jobs
is highly unstable.
The government doesn't care about profits;
it cares about creating enough jobs to continually employ more peasants.

Well - I'd somewhat agree with this - but you've missed a bit out.The above wages part is true - for china.

In the 'west' - we are at the moment living off the investment our grandfathers and great-grandfathers put in.

We have good sewers, good infrastructure, and the tip of the pyramid of an economy.

Most of the rest of the pyramid - the 'boring low-paid' jobs have been outsourced to china.

When chinas middle class gets going in a big way - and becomes a sizeable chunk of the population, suddenly exporting to the 'west' becomes a whole lot less important.

At this point we have major, major problems.

Chinese demand for resources goes up, as everyone wants a nice car and fridge and house.We have little to export to china, as we have little manufacturing, and their firms are upskilling, and improving in quality.Commodity prices go way up globally.The lack of competitive exports means that foreign trade earnings goes way down, especially as fake-manufacturing companies like Apple get overtaken in the market by cheaper, shinier devices sold, designed, and with all the profit remaining in china.

Expect to see the price of Chinese goods _vastly_ shooting up, along with a weakening dollar/pound/euro, horrible fuel price inflation (which is one reason we should be decarbonising now!), and the west attempting to rebuild a manufacturing industry with almost no existing base.

Expect all social promises to be broken.You (or if you're lucky, your children) are not getting the pension they thought they were, or if they do, it'll buy a bare fraction of what it did.

India? No, they are at the same state as China. China did it with GE, Walmart, Apple, Cisco, etc. India did it with Microsoft, Google, IBM, Accenture, Capgemini, etc.

India is probably a bit ahead of China in progress. China is facing a major shift in its people's behavior, makeup, wealth, demands, and political orientation. India has basically passed or doesn't have the same issues. Don't misunderstand me, they both still have a long way to go, just that India is ahead.

You want the next cheap labor? Look to where China is looking to meet their people's changing demand... Africa. Even though the US provides more aid to Africa than any other country, African nations respect and look toward China more cause they feel their future is with them. It's a changing world.

Know anybody in the business of delivering milk or ice door-to-door? Know any fullers, coopers or blacksmiths? Those used to be considered solid jobs as well. Dynamic economies constantly create and destroy entire categories of jobs. Why be upset when manufacturing high-tech devices is no longer something that can be profitably done?

Actually, you guys are missing a crucial element: between WWII and the 60s, America got rich rebuilding Europe. They weren't just selling loads of stuff to consumers, they were selling loads of stuff to a bombed-out continent full of more people. After Europe was rebuilt and didn't need America so much any more, things started going south in the US.

It is about getting control of all of the rest of that. Look carefully at how many cheap knock-offs of iphone there are. In fact, look at all of the totally ripped-off clones of western goods are coming from China. The issue is that China is building up loads of engineering, design, etc companies because they have access to the cheap manufacturing. And the time is coming, soon, that China gov. owned companies will destroy Apple, HP, Dell, IBM, GE, Westinghouse, Sony, Samsung, etc. Combine that with the fact that China is massively building up their military AND showing that they are ALL TOO HAPPY to use them, well, China's cold war with the west is in full swing while the fools around the west buy the BS.

With modern production methods, as well as trends like environmentalism, here is a need for less and less jobs overall as productivity goes up and demand grows more slowly than productivity.

While thing were different in hunter-gatherer times, the rise of agriculture and industrialism led to a lot of work (because there was less land to support each person and expectations also rose). But then productivity continues to improve exponentially.

Here are some examples. Five year old kids used to have to work in mines 200 years ago. Now they are sent to "school" often until their mid twenties or even longer. Work weeks used to be 80+ hours per week. Now work weeks are 35-40 hours plus paid vacations. People used to work until they died. Now in Europe many retire in their mid-fifties and live and eat and play for another three decades. People in their mid-twenties used to be the backbone of the economy. Now many educated 20-somethings in Europe have no jobs (and are rioting over that regularly like in Greece).

Agriculture has gone from 90% of the workforce to 2% or so over the last two hundred years in the USA. US manufacturing went from around 35% to 16% over the past fifty years, while still making the same or more amount of stuff and at higher quality. That number continues downward.

With computers and robotics (especially vision systems), more and more service jobs will come user the same pressures. We need to rethink our economics to account for this. For ideas on that, see writings by Marshall Brain, Martin Ford, or stuff on my website (essentially, a basic income of social security and medicare for all, an improved gift economy like Wikipeida and the blogosphere and GNU/Linux and Freecycle, improved subsistence like with 3D printers and agricultural robots, and better democratic resource-based planning).

A third of the world subsists on less than a dollar a day. Our grandchildren will be long dead before there's "no cheap labor left". India isn't particularly cheap, by the way. Most of the manufacturing leaving China is going to places like Indonesia, Vietnam, the Philippines, and Guatemala. And then there's Africa, in which a whole lot of places are untouched by anything resembling economic development.

Anyway, you proceed from a false assumption, which is that cheap labor drives an expanding economy. If that were true the world economy would have stalled with the end of slavery, which was ubiquitous well into the 19th century. Expensive labor means consumers with money to spend on cars and flat-screen televisions, as well as savings to invest in new ventures.

Not a joke, but presumably zero American peasants, as the hand assembly parts of the job are mind-numbingly boring and would soon be automated or designed out for QC reasons. For former Chinese peasants, the job is still mind-numbing, but then, so is setting out rice seedlings, with the added benefit that you get to work on the iPhone while sitting inside, rather than standing outside, up past your ankles in mud, bent over, all day. Of course, Foxconn (largest electronics assembly firm in the world) has announced that it intends to replace a half-million Chinese workers with robots, so within a few years the answer is also zero Chinese peasants.

If you want lots of high-paying jobs in the US and EU, kill every single guest worker program (fraud-ridden at any level), get rid of the ability to use length of unemployment (or employment) as a direct or indirect means of discriminating against the unemployed, and get rid of the tax and benefit dodges with second-class forms of labor (e.g. contractors, consultants). Finally, make it harder to not hire US citizens, within the US by making any tax cut follow the worker and is dependent on the length of time.

The US benefits considerably from the guest worker program at the cost to China, India and other foreign countries. The US is basically able to hand-pick the best and brightest from around the world and have them come to the US through the guest worker program (the largest being H1-B). A lot of countries, especially India and China, lose their best emerging scientists and engineers to either graduate schools in the US or to large multinational firms in the US. Ending the guest worker programs would divert those talent to a different country who would then work for companies and start companies and compete against the US. Guest worker programs are immensely beneficial to the US and ending would it would be harmful to the US.

On the other hand, I understand your disagreement for the guest worker program as you feel it directly or indirectly depresses wages in the field you are employed in. If there were no guest workers, then companies would be forced to find local workers and local workers would be in higher demand and thus higher wages. The guest workers who were employed because of some shortage would soon become permanent residents and then citizens of the US, and then directly compete in the marketplace in your field. Yes, it is completely reasonable and rational to be against a policy that depresses the wages in your field.

To a certain extent, the furor over H1B did get is severely restricted but the consequences weren't what you thought it would be, it wasn't high-paying jobs, the consequence was outsourcing. In the middle 00s, the H1b caps were severely restricted and getting H1Bs for a foreign worker became considerably harder. The consequence became that foreign companies used the situation to offer outsourcing services where work could now be shifted from the US soil to foreign soil. If foreign workers couldn't be brought to the US, then the work would go out of the country to the foreign workers. Attacking the H1B did nothing for the American worker, it actually made the situation worse through outsourcing.

Your final point is that it is fraught with fraud which I don't have enough experience to comment on but as someone who has worked with H1B holders, there is a lot of regulation in H1Bs. H1Bs can only be issued if a local worker was not found after the position was advertised. The foreign worker must be paid prevailing wages and the qualifications and salary for the position must be posted in public at the workplace. An American worker can at any time demand an H1B worker's position if he or she meets the requirements of the qualifications required to do the job. In most cases, hiring foreign workers on H1B is costs more money and is a bigger headache than hiring a local worker. I suppose fraud is possible but from my limited experience with H1Bs, most H1B are under so much scrutiny and regulations that companies would be exposing themselves to severe criminal fraud to defraud the H1B system.

Lastly, I have known and worked with and for many admirable people who are US citizens but were previously H1B holders. One of my bosses in a small startup was such a person and a few researchers I've worked with as well. I think the US is much richer and better place for them to be here in the US and I think everyone has directly or indirectly benefited from their presence here.